ECONOMIC NEWS: Equifax hack clouds news of rise in consumer borrowing

Consumer spending accounts for as much as 70 percent of the U.S. economy, so although it was good news that consumer borrowing rose at the fastest pace in five months in July, word of that development was overshadowed by the massive security breach at Equifax.

The credit bureau’s announcement that it exposed the Social Security numbers, birth dates and other personal information of 143 million Americans puts consumers once again at risk of having their data stolen and exploited by thieves.

"Most often, security questions to access those websites use that data, like a previous address, so this becomes an open-source intelligence nightmare, worse in many ways than the Office of Personnel Management government breach. It's nasty. If I can get my hands on that information, I can call a bank. They're going to ask me for your Social, address, the information that was leaked here, to get access."

“It is no exaggeration to suggest that a breach such as this — exposing highly sensitive personal and financial information central for identity management and access to credit — represents a real threat to the economic security of Americans,” U.S. Sen. Mark R. Warner said in a statement.

The Equifax breach occurred as the calendar begins to move toward the holiday shopping season. The National Retail Federation says holiday spending can account for as much as 30 percent of the annual sales at a store. Some people start spending on holiday gifts in October, or even sooner.

Equifax said it is offering a year of free identity theft protection and credit monitoring services. The public has gotten used to reports about stolen credit data, so the hack may have little effect on their spending. Nonetheless, U.S. News & World Report said analysts are predicting that the hack could cause trouble for consumers for years.

So there likely was less to celebrate for companies in the consumer economy that total consumer credit increased by $18.5 billion in July, or 6.9 percent, to $3.75 trillion.

MarketWatch said so-called nonrevolving credit, largely reflecting loans for education and new autos, also rose at an annual rate of 6.9 percent in July. That’s more than double the 3.1 percent rate in the prior month.

Revolving credit, composed mostly of credit-card purchases, rose at an annual rate of 3.2 percent in July after climbing 5.8 percent in June.

The recovery from the Great Recession has lasted for eight years, the nation’s jobless rate is at 4.4 percent and incomes have begun to rise more rapidly. Besides consumer credit, other economic reports released last week indicated that, absent a jolt to the economy, those conditions were likely to continue.

The Federal Reserve’s latest Beige Book report said the economy grew modestly to moderately in July and through the middle of August, but there were few signs of inflation.

Meanwhile, economic activity in the country’s non-manufacturing sector grew for the 92nd month in a row in August, purchasing and supply executives said. The Institute for Supply Management said its non-manufacturing index rose to 55.3 percent in August from 53.9 percent in July. The July reading was the lowest in the past year.